American International Group, Inc....Policyholder contract deposits (portion measured at fair value:...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 ________________

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020

OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8787

American International Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware 13-2592361 (State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

175 Water Street, New York, New York 10038 (Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 770-7000

________________

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class Trading Symbol Name of each exchange on which registered Common Stock, Par Value $2.50 Per Share AIG New York Stock Exchange Warrants (expiring January 19, 2021) AIG WS New York Stock Exchange 5.75% Series A-2 Junior Subordinated Debentures AIG 67BP New York Stock Exchange 4.875% Series A-3 Junior Subordinated Debentures AIG 67EU New York Stock Exchange Stock Purchase Rights New York Stock Exchange Depositary Shares Each Representing a 1/1,000th Interest in a Share of

Series A 5.85% Non-Cumulative Perpetual Preferred Stock AIG PRA New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 2, 2020, there were 861,525,734 shares outstanding of the registrant’s common stock.

AIG | Third Quarter 2020 Form 10-Q 1

AMERICAN INTERNATIONAL GROUP, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020 TABLE OF CONTENTS

FORM 10-Q Item Number Description Page

Part I — Financial Information

ITEM 1 Condensed Consolidated Financial Statements 2 Note 1. Basis of Presentation 9 Note 2. Summary of Significant Accounting Policies 11 Note 3. Segment Information 15 Note 4. Fair Value Measurements 19 Note 5. Investments 36 Note 6. Lending Activities 49 Note 7. Reinsurance 53 Note 8. Variable Interest Entities 56 Note 9. Derivatives and Hedge Accounting 58 Note 10. Insurance Liabilities 62 Note 11. Contingencies, Commitments and Guarantees 65 Note 12. Equity 67 Note 13. Earnings Per Common Share (EPS) 73 Note 14. Employee Benefits 74 Note 15. Income Taxes 75 Note 16. Subsequent Events 78 ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 79 Cautionary Statement Regarding Forward-Looking Information 79 Use of Non-GAAP Measures 82 Critical Accounting Estimates 85 Executive Summary 88 Consolidated Results of Operations 99 Business Segment Operations 105 Investments 142 Insurance Reserves 154 Liquidity and Capital Resources 168 Enterprise Risk Management 180 Regulatory Environment 180 Glossary 183 Acronyms 186 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 187 ITEM 4 Controls and Procedures 187

Part II — Other Information ITEM 1 Legal Proceedings 188 ITEM 1A Risk Factors 188 ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 190 ITEM 4 Mine Safety Disclosures 190 ITEM 6 Exhibits 191

Signatures 192

2 AIG | Third Quarter 2020 Form 10-Q

Part I – Financial Information Item 1. | Financial Statements American International Group, Inc. Condensed Consolidated Balance Sheets (unaudited) September 30, December 31, (in millions, except for share data) 2020 2019 Assets:

Investments: Fixed maturity securities:

Bonds available for sale, at fair value, net of allowance for credit losses of $236 in 2020 (amortized cost: 2020 - $242,470; 2019 - $233,230) $ 265,965 $ 251,086

Other bond securities, at fair value (See Note 5) 5,415 6,682 Equity securities, at fair value (See Note 5) 871 841 Mortgage and other loans receivable, net of allowance for credit losses of $797 in 2020 and $438 in 2019 45,590 46,984 Other invested assets (portion measured at fair value: 2020 - $7,064; 2019 - $6,827) 17,915 18,792 Short-term investments, including restricted cash of $214 in 2020 and $188 in 2019

(portion measured at fair value: 2020 - $7,214; 2019 - $5,343) 20,648 13,230 Total investments 356,404 337,615

Cash 3,191 2,856 Accrued investment income 2,324 2,334 Premiums and other receivables, net of allowance for credit losses and disputes of $215 in 2020 and $178 in 2019 11,827 10,274 Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes of $0 in 2020 34,707 - Reinsurance assets - other, net of allowance for credit losses and disputes of $318 in 2020 and $151 in 2019 40,337 37,977 Deferred income taxes 12,958 13,146 Deferred policy acquisition costs 10,176 11,207 Other assets, net of allowance for credit losses of $52 in 2020, including restricted cash of $202 in 2020 and $243 in 2019

(portion measured at fair value: 2020 - $901; 2019 - $3,151) 13,270 16,383 Separate account assets, at fair value 92,036 93,272

Total assets $ 577,230 $ 525,064 Liabilities:

Liability for unpaid losses and loss adjustment expenses, net of allowance for credit losses of $14 in 2020 $ 78,584 $ 78,328 Unearned premiums 20,093 18,269 Future policy benefits for life and accident and health insurance contracts 51,090 50,512 Policyholder contract deposits (portion measured at fair value: 2020 - $9,322; 2019 - $6,910) 158,205 151,869 Other policyholder funds 3,571 3,428 Fortitude Re funds withheld payable (portion measured at fair value: 2020 - $5,136) 42,543 - Other liabilities (portion measured at fair value: 2020 - $600; 2019 - $1,100) 28,264 26,609 Long-term debt (portion measured at fair value: 2020 - $2,169; 2019 - $2,062) 28,731 25,479 Debt of consolidated investment entities 9,506 9,871 Separate account liabilities 92,036 93,272

Total liabilities 512,623 457,637 Contingencies, commitments and guarantees (See Note 11)

nil nil

AIG shareholders’ equity: Series A Non-cumulative preferred stock and additional paid in capital, $5.00 par value; 100,000,000 shares

authorized; shares issued: 2020 - 20,000 and 2019 - 20,000; liquidation preference $500 485 485 Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2020 - 1,906,671,492 and

2019 - 1,906,671,492 4,766 4,766 Treasury stock, at cost; 2020 - 1,045,222,917 shares; 2019 - 1,036,672,461 shares of common stock (49,327) (48,987) Additional paid-in capital 81,368 81,345 Retained earnings 15,838 23,084 Accumulated other comprehensive income 10,978 4,982

Total AIG shareholders’ equity 64,108 65,675 Non-redeemable noncontrolling interests 499 1,752 Total equity 64,607 67,427 Total liabilities and equity $ 577,230 $ 525,064

See accompanying Notes to Condensed Consolidated Financial Statements.


American International Group, Inc. Condensed Consolidated Statements of Income (Loss) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, (dollars in millions, except per common share data) 2020 2019 2020 2019 Revenues:

Premiums $ 6,677 $ 7,617 $ 21,527 $ 23,117 Policy fees 648 733 2,152 2,237 Net investment income:

Net investment income - excluding Fortitude Re funds withheld assets 3,342 3,408 9,100 11,032 Net investment income - Fortitude Re funds withheld assets* 458 - 574 -

Total net investment income 3,800 3,408 9,674 11,032 Net realized capital gains (losses):

Net realized capital gains (losses) - excluding Fortitude Re funds withheld assets (498) 929 1,430 887 Net realized capital gains (losses) on Fortitude Re funds withheld assets* 32 - 128 - Net realized capital gains (losses) on Fortitude Re funds withheld embedded

derivative* (656) - (1,493) - Total net realized capital gains (losses) (1,122) 929 65 887

Other income 218 227 642 658 Total revenues 10,221 12,914 34,060 37,931 Benefits, losses and expenses:

Policyholder benefits and losses incurred 5,872 6,892 18,718 19,373 Interest credited to policyholder account balances 882 966 2,757 2,873 Amortization of deferred policy acquisition costs 707 1,252 3,323 3,980 General operating and other expenses 1,991 2,187 6,231 6,380 Interest expense 379 348 1,099 1,057 (Gain) loss on extinguishment of debt (2) - 15 13 Net loss on sale or disposal of divested businesses 24 9 8,652 4

Total benefits, losses and expenses 9,853 11,654 40,795 33,680 Income (loss) from continuing operations before income tax expense (benefit) 368 1,260 (6,735) 4,251 Income tax expense (benefit) 74 287 (918) 950 Income (loss) from continuing operations 294 973 (5,817) 3,301 Income (loss) from discontinued operations, net of income taxes 5 - 4 (1) Net income (loss) 299 973 (5,813) 3,300 Less: Net income from continuing operations attributable to

noncontrolling interests 11 317 78 881 Net income (loss) attributable to AIG 288 656 (5,891) 2,419 Less: Dividends on preferred stock 7 8 22 15 Net income (loss) attributable to AIG common shareholders $ 281 $ 648 $ (5,913) $ 2,404

Income (loss) per common share attributable to AIG common shareholders: Basic:

Income (loss) from continuing operations $ 0.31 $ 0.74 $ (6.80) $ 2.74 Income (loss) from discontinued operations $ 0.01 $ - $ - $ - Net income (loss) attributable to AIG common shareholders $ 0.32 $ 0.74 $ (6.80) $ 2.74

Diluted: Income (loss) from continuing operations $ 0.31 $ 0.72 $ (6.80) $ 2.71 Income (loss) from discontinued operations $ 0.01 $ - $ - $ - Net income (loss) attributable to AIG common shareholders $ 0.32 $ 0.72 $ (6.80) $ 2.71

Weighted average shares outstanding: Basic 867,713,308 877,009,495 869,627,926 876,262,372 Diluted 873,130,950 895,814,410 869,627,926 887,221,116

* Represents activity subsequent to the deconsolidation of Fortitude Re on June 2, 2020.



American International Group, Inc. Condensed Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2020 2019 2020 2019 Net income (loss) $ 299 $ 973 $ (5,813) $ 3,300 Other comprehensive income, net of tax

Change in unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken 79 - (154) -

Change in unrealized appreciation (depreciation) of fixed maturity securities on which other-than-temporary credit impairments were taken - (2) - 756

Change in unrealized appreciation of all other investments 1,385 656 5,925 6,278 Change in foreign currency translation adjustments 352 (34) 206 1 Change in retirement plan liabilities adjustment (1) 7 1 14 Change in fair value of liabilities under fair value option attributable to changes in

own credit risk 1 1 2 (1) Other comprehensive income 1,816 628 5,980 7,048 Comprehensive income 2,115 1,601 167 10,348 Comprehensive income attributable to noncontrolling interests 18 321 62 901 Comprehensive income attributable to AIG $ 2,097 $ 1,280 $ 105 $ 9,447 See accompanying Notes to Condensed Consolidated Financial Statements.


American International Group, Inc. Condensed Consolidated Statements of Equity (unaudited) Preferred Non- Stock and Accumulated Total AIG redeemable Additional Additional Other Share- Non- Paid-in Common Treasury Paid-in Retained Comprehensive holders' controlling Total (in millions) Capital Stock Stock Capital Earnings Income Equity Interests Equity

Three Months Ended September 30, 2020 Balance, beginning of period $ 485 $ 4,766 $ (49,327) $ 81,294 $ 15,847 $ 9,169 $ 62,234 $ 584 $ 62,818 Cumulative effect of change in accounting

principle, net of tax - - - - - - - - - Preferred stock issued - - - - - - - - - Common stock issued under stock plans - - - (1) - - (1) - (1) Purchase of common stock - - - - - - - - - Net income attributable to AIG or

noncontrolling interests - - - - 288 - 288 11 299 Dividends on preferred stock - - - - (7) - (7) - (7) Dividends on common stock - - - - (276) - (276) - (276) Other comprehensive income - - - - - 1,809 1,809 7 1,816 Net decrease due to deconsolidation - - - - - - - (28) (28) Contributions from noncontrolling interests - - - - - - - - - Distributions to noncontrolling interests - - - - - - - (71) (71) Other - - - 75 (14) - 61 (4) 57 Balance, end of period $ 485 $ 4,766 $ (49,327) $ 81,368 $ 15,838 $ 10,978 $ 64,108 $ 499 $ 64,607 Nine Months Ended September 30, 2020 Balance, beginning of year $ 485 $ 4,766 $ (48,987) $ 81,345 $ 23,084 $ 4,982 $ 65,675 $ 1,752 $ 67,427 Cumulative effect of change in accounting

principle, net of tax - - - - (487) - (487) - (487) Preferred stock issued - - - - - - - - - Common stock issued under stock plans - - 167 (265) - - (98) - (98) Purchase of common stock - - (500) - - - (500) - (500) Net income (loss) attributable to AIG or

noncontrolling interests - - - - (5,891) - (5,891) 78 (5,813) Dividends on preferred stock - - - - (22) - (22) - (22) Dividends on common stock - - - - (827) - (827) - (827) Other comprehensive income (loss) - - - - - 5,996 5,996 (16) 5,980 Net decrease due to deconsolidation - - - - - - - (1,199) (1,199) Contributions from noncontrolling interests - - - - - - - 4 4 Distributions to noncontrolling interests - - - - - - - (113) (113) Other - - (7) 288 (19) - 262 (7) 255 Balance, end of period $ 485 $ 4,766 $ (49,327) $ 81,368 $ 15,838 $ 10,978 $ 64,108 $ 499 $ 64,607


American International Group, Inc. Condensed Consolidated Statements of Equity (unaudited)(continued) Preferred Non- Stock and Accumulated Total AIG redeemable Additional Additional Other Share- Non- Paid-in Common Treasury Paid-in Retained Comprehensive holders' controlling Total (in millions) Capital Stock Stock Capital Earnings Income (Loss) Equity Interests Equity

Three Months Ended September 30, 2019 Balance, beginning of period $ 485 $ 4,766 $ (48,991) $ 81,211 $ 22,077 $ 4,991 $ 64,539 $ 1,566 $ 66,105 Preferred stock issued - - - - - - - - - Common stock issued under stock plans - - 1 - - - 1 - 1 Purchase of common stock - - - - - - - - - Net income attributable to AIG or

noncontrolling interests - - - - 656 - 656 317 973 Dividends on preferred stock - - - - (8) - (8) - (8) Dividends on common stock - - - - (278) - (278) - (278) Other comprehensive income - - - - - 624 624 4 628 Current and deferred income taxes - - - - - - - - - Net decrease due to acquisitions

and consolidations - - - - - - - (18) (18) Contributions from noncontrolling interests - - - - - - - 11 11 Distributions to noncontrolling interests - - - - - - - (37) (37) Other - - 1 76 (8) - 69 (1) 68 Balance, end of period $ 485 $ 4,766 $ (48,989) $ 81,287 $ 22,439 $ 5,615 $ 65,603 $ 1,842 $ 67,445 Nine Months Ended September 30, 2019 Balance, beginning of year $ - $ 4,766 $ (49,144) $ 81,268 $ 20,884 $ (1,413) $ 56,361 $ 948 $ 57,309 Preferred stock issued 485 - - - - - 485 - 485 Common stock issued under stock plans - - 154 (231) - - (77) - (77) Purchase of common stock - - - - - - - - - Net income attributable to AIG or

noncontrolling interests - - - - 2,419 - 2,419 881 3,300 Dividends on preferred stock - - - - (15) - (15) - (15) Dividends on common stock - - - - (835) - (835) - (835) Other comprehensive income - - - - - 7,028 7,028 20 7,048 Current and deferred income taxes - - - - - - - - - Net increase due to acquisitions

and consolidations - - - - - - - 78 78 Contributions from noncontrolling interests - - - - - - - 13 13 Distributions to noncontrolling interests - - - - - - - (106) (106) Other - - 1 250 (14) - 237 8 245 Balance, end of period $ 485 $ 4,766 $ (48,989) $ 81,287 $ 22,439 $ 5,615 $ 65,603 $ 1,842 $ 67,445



American International Group, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) Nine Months Ended September 30, (in millions) 2020 2019 Cash flows from operating activities:

Net income (loss) $ (5,813) $ 3,300 (Income) loss from discontinued operations (4) 1 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Noncash revenues, expenses, gains and losses included in income (loss):

Net gain on sales of securities available for sale and other assets (675) (600) Net loss on sale or disposal of divested businesses 8,652 4 Losses on extinguishment of debt 15 13 Unrealized (gains) losses in earnings - net 72 (273) Equity in loss from equity method investments, net of dividends or distributions 210 90 Depreciation and other amortization 3,223 3,833 Impairments of assets 79 237

Changes in operating assets and liabilities: Insurance reserves 1,818 (2,146) Premiums and other receivables and payables - net 2,152 (42) Reinsurance assets and funds held under reinsurance contracts (2,148) (1,200) Capitalization of deferred policy acquisition costs (3,256) (4,181) Current and deferred income taxes - net (1,793) 757 Other, net (300) (582) Total adjustments 8,049 (4,090)

Net cash provided by (used in) operating activities 2,232 (789) Cash flows from investing activities: Proceeds from (payments for)

Sales or distributions of: Available for sale securities 17,303 17,498 Other securities 2,256 5,230 Other invested assets 3,159 3,345 Divested businesses, net 2,119 2

Maturities of fixed maturity securities available for sale 19,441 18,165 Principal payments received on and sales of mortgage and other loans receivable 5,177 4,233 Purchases of:

Available for sale securities (43,228) (41,612) Other securities (562) (723) Other invested assets (2,197) (2,662) Mortgage and other loans receivable (4,072) (6,512)

Net change in short-term investments (7,368) (4,586) Other, net 2,751 2,829

Net cash used in investing activities (5,221) (4,793) Cash flows from financing activities: Proceeds from (payments for)

Policyholder contract deposits 14,014 17,297 Policyholder contract withdrawals (12,184) (12,474) Issuance of long-term debt and debt of consolidated investment entities 5,625 2,564 Repayments of long-term debt and debt of consolidated investment entities (3,249) (2,421) Issuance of preferred stock, net of issuance costs - 485 Purchase of common stock (500) - Dividends paid on preferred stock (22) (15) Dividends paid on common stock (827) (835) Other, net 425 1,354

Net cash provided by financing activities 3,282 5,955 Effect of exchange rate changes on cash and restricted cash 27 39 Net increase in cash and restricted cash 320 412 Cash and restricted cash at beginning of year 3,287 3,358 Cash and restricted cash at end of period $ 3,607 $ 3,770


American International Group, Inc. Condensed Consolidated Statements of Cash Flows (unaudited)(continued)

Supplementary Disclosure of Condensed Consolidated Cash Flow Information

Nine Months Ended September 30, (in millions) 2020 2019 Cash $ 3,191 $ 3,361 Restricted cash included in Short-term investments* 214 64 Restricted cash included in Other assets* 202 345 Total cash and restricted cash shown in the Condensed Consolidated Statements of Cash Flows $ 3,607 $ 3,770

Cash paid during the period for: Interest $ 829 $ 1,012 Taxes $ 875 $ 193

Non-cash investing activities: Fixed maturity securities available for sale received in connection with pension risk transfer transactions $ 1,008 $ - Fixed maturity securities received in connection with reinsurance transactions $ 336 $ -

Non-cash financing activities: Interest credited to policyholder contract deposits included in financing activities $ 2,425 $ 2,507

* Includes funds held for tax sharing payments to AIG Parent, security deposits, and replacement reserve deposits related to our affordable housing investments.


ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 1. Basis of Presentation


1. Basis of Presentation American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 80 countries and jurisdictions. AIG companies serve commercial and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG Common Stock, par value $2.50 per share (AIG Common Stock), is listed on the New York Stock Exchange (NYSE: AIG). Unless the context indicates otherwise, the terms “AIG,” “we,” “us” or “our” mean American International Group, Inc. and its consolidated subsidiaries and the term “AIG Parent” means American International Group, Inc. and not any of its consolidated subsidiaries.

These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) and should be read in conjunction with the audited Consolidated Financial Statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Annual Report). The condensed consolidated financial information as of December 31, 2019 included herein has been derived from the audited Consolidated Financial Statements in the 2019 Annual Report.

Certain of our foreign subsidiaries included in the Condensed Consolidated Financial Statements report on the basis of a fiscal period ending November 30. The effect on our consolidated financial condition and results of operations of all material events occurring at these subsidiaries through the date of each of the periods presented in these Condensed Consolidated Financial Statements has been considered for adjustment and/or disclosure. In the opinion of management, these Condensed Consolidated Financial Statements contain normal recurring adjustments, including eliminations of material intercompany accounts and transactions, necessary for a fair statement of the results presented herein. Operating results for the nine months ended September 30, 2020, are not necessarily indicative of the results that may be expected for the year ended December 31, 2020, especially when considering the risks and uncertainties associated with COVID-19 and the impact it may have on our business, results of operations and financial condition.

We evaluated the need to recognize or disclose events that occurred subsequent to September 30, 2020 and prior to the issuance of these Condensed Consolidated Financial Statements.

SALES/DISPOSALS OF BUSINESSES

Fortitude Holdings

On June 2, 2020, we completed the sale of a majority of the interests in Fortitude Group Holdings, LLC (Fortitude Holdings) to Carlyle FRL, L.P. (Carlyle FRL), an investment fund advised by an affiliate of The Carlyle Group Inc. (Carlyle), and T&D United Capital Co., Ltd. (T&D), a subsidiary of T&D Holdings, Inc., under the terms of a membership interest purchase agreement entered into on November 25, 2019 by and among AIG, Fortitude Holdings, Carlyle FRL, Carlyle, T&D and T&D Holdings, Inc. (the Majority Interest Fortitude Sale). AIG established Fortitude Reinsurance Company Ltd. (Fortitude Re), a wholly owned subsidiary of Fortitude Holdings, in 2018 in a series of reinsurance transactions related to AIG’s Legacy Portfolio. As of September 30, 2020, approximately $30.6 billion of reserves from AIG’s Legacy Life and Retirement Run-Off Lines and approximately $4.1 billion of reserves from AIG’s Legacy General Insurance Run-Off Lines, related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions. As of closing of the Majority Interest Fortitude Sale, these reinsurance transactions are no longer considered affiliated transactions and Fortitude Re is the reinsurer of the majority of AIG’s Legacy Portfolio. As these reinsurance transactions are structured as modified coinsurance and loss portfolio transfers with funds withheld, following the closing of the Majority Interest Fortitude Sale, AIG continues to reflect the invested assets, which consist mostly of available for sale securities, supporting Fortitude Re’s obligations, in AIG’s financial statements.



AIG sold a 19.9 percent ownership interest in Fortitude Holdings to TC Group Cayman Investments Holdings, L.P. (TCG), an affiliate of Carlyle, in November 2018 (the 2018 Fortitude Sale). As a result of completion of the Majority Interest Fortitude Sale, Carlyle FRL purchased from AIG a 51.6 percent ownership interest in Fortitude Holdings and T&D purchased from AIG a 25 percent ownership interest in Fortitude Holdings; AIG retained a 3.5 percent ownership interest in Fortitude Holdings and one seat on its Board of Managers. The $2.2 billion of proceeds received by AIG at closing include (i) the $1.8 billion under the Majority Interest Fortitude Sale, which is subject to a post-closing purchase price adjustment pursuant to which AIG will pay Fortitude Re for certain adverse development in property casualty related reserves, based on an agreed methodology, that may occur on or prior to December 31, 2023, up to a maximum payment of $500 million; and (ii) a $383 million purchase price adjustment from Carlyle FRL and T&D, corresponding to their respective portions of a proposed $500 million non-pro rata distribution from Fortitude Holdings that was not received by AIG prior to the closing.

AIG recorded a total after-tax reduction to total AIG shareholders’ equity of $4.3 billion related to the sale of the majority interest in and deconsolidation of Fortitude Holdings in the second quarter of 2020. The impact to equity was primarily due to a $6.7 billion after-tax loss partially offset by a $2.4 billion increase in accumulated other comprehensive income (AOCI) due to the release of shadow adjustments primarily related to future policy benefits. The $6.7 billion after-tax loss was comprised of (i) a $2.7 billion loss related to the write-off of prepaid insurance assets and deferred policy acquisition costs (DAC) upon deconsolidation of Fortitude Holdings and (ii) $4.0 billion related to the loss on the sale primarily as a result of increases in Fortitude Holdings’ equity principally related to mark to market movements from the December 31, 2018 date as of which Fortitude Holdings’ equity was calculated for purposes of the purchase price determination, through the June 2, 2020 closing date.

In connection with the Majority Interest Fortitude Sale, AIG, Fortitude Holdings, and TCG agreed that, effective as of the closing, (i) AIG’s investment commitment targets under the 2018 Fortitude Sale (whereby AIG had agreed to invest certain amounts into various Carlyle strategies and to make certain minimum investment management fee payments by November 2021) were assumed by Fortitude Holdings and AIG was released therefrom, (ii) the purchase price adjustment that AIG had agreed to provide TCG in the 2018 Fortitude Sale (whereby AIG had agreed to reimburse TCG for adverse development in property casualty related reserves, based on an agreed methodology, that may occur on or prior to December 31, 2023, up to the value of TCG’s investment in Fortitude Holdings) has been terminated, and (iii) TCG remains obligated to pay AIG $115 million of deferred consideration upon settlement of the post-closing purchase price adjustment referred to above. This latter amount is composed of $95 million of deferred consideration contemplated as part of the 2018 Fortitude Sale, together with $19.9 million in respect of TCG’s 19.9 percent share of the unpaid portion of the $500 million non-pro rata dividend to be paid to AIG under the 2018 Fortitude Sale (TCG paid $79.6 million to AIG on May 26, 2020). In addition, the 2018 capital maintenance agreement between AIG and Fortitude Re and the letters of credit issued in support of Fortitude Re and subject to reimbursement by AIG in the event of a drawdown were terminated as of the closing of the Majority Interest Fortitude Sale. Upon closing of the Majority Interest Fortitude Sale, AIG entered into a transition services agreement with Fortitude Holdings for the provision of transition services for a period after closing, and letter of credit agreements with certain financial institutions, which issued letters of credit in support of certain General Insurance subsidiaries that have reinsurance agreements in place with Fortitude Re in the amount of $600 million. These letters of credit are subject to reimbursement by AIG in the event of a drawdown by these insurance subsidiaries.

Following closing, in the second quarter of 2020, AIG contributed $700 million of the proceeds of the Majority Interest Fortitude Sale to certain of its General Insurance subsidiaries and $135 million of the proceeds of the Majority Interest Fortitude Sale to certain of its Life and Retirement subsidiaries.

For further discussion on the sale of Fortitude Holdings see Note 7 to the Condensed Consolidated Financial Statements.

Blackboard

At the end of March 2020, Blackboard U.S. Holdings, Inc. (Blackboard), AIG’s technology-driven subsidiary, was placed into run-off. As a result of this decision, during the three months ended March 31, 2020 and the nine months ended September 30, 2020, AIG recognized a pre-tax loss of $210 million, primarily consisting of asset impairment charges.

Life and Retirement On October 26, 2020, AIG announced its intention to separate its Life and Retirement business from AIG. For further discussion see Note 16 to the Condensed Consolidated Financial Statements.



USE OF ESTIMATES The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of:

• liability for unpaid losses and loss adjustment expenses (loss reserves);

• valuation of future policy benefit liabilities and timing and extent of loss recognition;

• valuation of liabilities for guaranteed benefit features of variable annuity products;

• valuation of embedded derivatives for fixed index annuity and life products;

• estimated gross profits to value deferred policy acquisition costs for investment-oriented products;

• reinsurance assets;

• impairment charges, including impairments on other invested assets and goodwill;

• allowances for credit losses primarily on loans, available for sale fixed maturity securities, reinsurance assets and premiums and other receivables;

• liability for legal contingencies;

• fair value measurements of certain financial assets and liabilities; and

• income tax assets and liabilities, including recoverability of our net deferred tax asset and the predictability of future tax operating profitability of the character necessary to realize the net deferred tax asset and estimates associated with the Tax Cuts and Jobs Act (the Tax Act).

These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.

2. Summary of Significant Accounting Policies

ACCOUNTING STANDARDS ADOPTED DURING 2020

Financial Instruments - Credit Losses In June 2016, the FASB issued an accounting standard that changed how entities account for current expected credit losses (CECL) for most financial assets, premiums receivable, trade receivables, off-balance sheet exposures and reinsurance receivables (the Financial Instruments Credit Losses Standard). The standard requires an allowance for credit losses based on the expectation of lifetime credit losses related to such financial assets subject to credit losses, including loans measured at amortized cost, reinsurance receivables and certain off-balance sheet credit exposures. Additionally, the impairment of available-for-sale debt securities, including purchased credit deteriorated (PCD) securities, is subject to the new guidance and is measured in a similar manner, except that losses are recognized as allowances rather than reductions in the amortized cost of the securities. The standard allows for reversals of credit impairments in the event that the credit of an issuer improves. The standard also requires additional disclosures.

We adopted the standard on its effective date of January 1, 2020 using a modified retrospective method, which requires a cumulative effect adjustment to retained earnings. As of January 1, 2020, the impact of the adoption of the standard was a reduction in opening retained earnings of $487 million (after-tax) primarily driven by commercial mortgage loans, and, to a lesser extent, reinsurance receivables and recoverables.

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 2. Summary of Signif icant Accounting Policies


The following table provides a rollforward of our allowance, including credit losses, in connection with the adoption of the Financial Instruments Credit Losses Standard as well as cross references to the applicable notes herein for additional information:

Three Months Ended September 30, 2020 Balance, Cumulative Effect Purchased Credit Incremental Increase Write-offs and Balance, Beginning Adjustment as of Deteriorated Initial (Decrease) Recognized Other Changes End of (in millions) of Period January 1, 2020 Allowance in Income in the Allowance(h) Period

Securities available for sale(a) $ 198 $ - $ - $ 81 $ (43) $ 236 Mortgage and other loan receivables(b) 794 - - 3 - 797 Reinsurance recoverables (inclusive of

deposit accounted assets)(c) 364 - - - 6 370 Premiums and other receivables(d) 212 - - 7 (4) 215 Contractual deductible recoverables(e) 14 - - - - 14 Commercial mortgage loan commitments(f) 58 - - 8 - 66 Total $ 1,640 $ - $ - $ 99 $ (41) $ 1,698

Nine Months Ended September 30, 2020 Securities available for sale(a) $ - $ - $ 33 $ 310 $ (107) $ 236 Mortgage and other loan receivables(b) 438 318 - 53 (12) 797 Reinsurance recoverables (inclusive of

deposit accounted assets)(c) 151 224 - 5 (10) 370 Premiums and other receivables(d) 178 34 - 9 (6) 215 Contractual deductible recoverables(e) - 14 - - - 14 Commercial mortgage loan commitments(f) - 51 - 14 1 66 Total $ 767 $ 641 $ 33 $ 391 $ (134) $ 1,698 Secondary impacts to certain long-duration

insurance contracts(g) (27)

Tax impact (127)

Total cumulative effect adjustment $ 487

(a) The allowance for credit losses is reported in Bonds available for sale in the Condensed Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in Net realized capital gains (losses) in the Condensed Consolidated Statements of Income. Refer to Note 5 for additional information.

(b) The allowance for credit losses is reported in Mortgage and other loans receivable in the Condensed Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in Net realized capital gains (losses) in the Condensed Consolidated Statements of Income. Refer to Note 6 for additional information.

(c) The allowance for credit losses is reported in Reinsurance assets – other and Reinsurance assets – Fortitude Re for reinsurance contracts that contain sufficient insurance risk, and reported in Other assets for insurance and reinsurance contracts that do not contain sufficient insurance risk in the Condensed Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in Policyholder benefits and losses incurred for reinsurance contracts that do contain sufficient insurance risk and premiums for contracts that do not contain sufficient insurance risk in the Condensed Consolidated Statements of Income. Refer to Note 7 for additional information.

(d) The allowance for credit losses is reported in Premiums and other receivables in the Condensed Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in General operating and other expenses in the Condensed Consolidated Statements of Income. Refer to Note 2 for additional information.

(e) The allowance for credit losses is reported in Liability for unpaid losses and loss adjustment expenses in the Condensed Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in Policyholder benefits and losses incurred in the Condensed Consolidated Statements of Income. Refer to Note 10 for additional information.

(f) The allowance for credit losses is reported in Other liabilities in the Condensed Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in Net realized capital gains (losses) in the Condensed Consolidated Statements of Income. Refer to Note 6 for additional information.

(g) This reflects adjustments to the amortization of DAC, unearned revenue reserve and sales inducement assets as well as impacts on the future policy benefits for certain universal life and variable annuity contracts.

(h) A write-off does not generally result in an incremental loss to AIG. Prior to a write-off occurring, the allowance for the credit loss is increased or decreased to reflect AIG’s expectation of the credit loss to be incurred. Accordingly, when a write-off occurs, the allowance is reversed for the same amount, resulting in no incremental loss to AIG.



The following presents the impact of the adoption of the standard on premiums and other receivables.

Premiums and other receivables — Credit Losses

Premiums and other receivables, net of allowance for credit losses include premium balances receivable, amounts due from agents and brokers and policyholders, trade receivables for the Direct Investment book and Global Capital Markets (GCM) and other receivables. Trade receivables for GCM include cash collateral posted to derivative counterparties that is not eligible to be netted against derivative liabilities. The allowance for credit losses and disputes for premiums and other receivables was $215 million at September 30, 2020. Our allowance for credit losses for premium receivables considers a combination of internal and external information relating to past events, current conditions and reasonable and supportable forecasts. Our allowance contemplates our contractual provisions. Upon default or delinquency of the policyholder we may be able to cease coverage for the remaining period. In certain jurisdictions we are unable to cancel coverage even in the event of delinquency or default by the policyholder. We consider premium and other receivable balances to be past due if the payment is not received after 90 days from the contractual obligation due date and record an allowance for disputes when there is reasonable uncertainty of the collectability of a disputed amount during the reporting period.

For further information regarding the impacts of the adoption of this standard see Notes 4, 5, 6, 10 and 12 to the Condensed Consolidated Financial Statements.

Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued an accounting standard that eliminates the requirement to calculate the implied fair value of goodwill, through a hypothetical purchase price allocation, to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value not to exceed the total amount of goodwill allocated to that reporting unit. An entity should also consider income tax effects from tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

We adopted the standard on its effective date of January 1, 2020. The adoption of the standard did not have a material impact on our financial position, results of operations or cash flows.

Cloud Computing Arrangements In August 2018, the FASB issued an accounting standard that aligns the requirements for capitalizing implementation costs incurred in a cloud computing (or hosting) arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Capitalized implementation costs must be amortized over the term of the hosting arrangement. The accounting for the service element is not affected by the amendments in this update.

We adopted the standard prospectively on its effective date of January 1, 2020. The adoption of the standard did not have a material impact on our consolidated financial position, results of operations or cash flows.

Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to simplify and streamline the disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered, and issuers’ affiliates whose securities collateralize securities registered or being registered. Currently, the SEC permits the omission of separate financial statements of subsidiary issuers and guarantors when certain conditions are met and the parent company provides summarized financial information of the subsidiary issuers and guarantors. The amendments, among other things, allow companies to cease providing summarized financial information if the subsidiary issuer’s or guarantor’s reporting obligation has been suspended.

The amendments are effective January 4, 2021, with early adoption permitted. Effective March 31, 2020, AIG early adopted the amendment and ceased providing the summarized information for the subsidiary issuers and guarantors because the subsidiaries issuer’s reporting obligations have been suspended.



FUTURE APPLICATION OF ACCOUNTING STANDARDS

Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB issued an accounting standard update with the objective of making targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The standard prescribes significant and comprehensive changes to recognition, measurement, presentation and disclosure as summarized below:

• Requires the review and if necessary update of future policy benefit assumptions at least annually for traditional and limited pay long duration contracts, with the recognition and separate presentation of any resulting re-measurement gain or loss (except for discount rate changes as noted below) in the income statement.

• Requires the discount rate assumption to be updated at the end of each reporting period using an upper medium grade (low-credit risk) fixed income instrument yield that maximizes the use of observable market inputs and recognizes the impact of changes to discount rates in other comprehensive income.

• Simplifies the amortization of DAC to a constant level basis over the expected term of the related contracts with adjustments for unexpected terminations, but no longer requires an impairment test.

• Requires the measurement of all market risk benefits associated with deposit (or account balance) contracts at fair value through the income statement with the exception of instrument-specific credit risk changes, which will be recognized in other comprehensive income.

• Increased disclosures of disaggregated roll-forwards of policy benefits, account balances, market risk benefits, separate account liabilities and information about significant inputs, judgments and methods used in measurement and changes thereto and impact of those changes.

In September 2020, the FASB affirmed its proposal to defer the effective date of the standard to January 1, 2023, which the FASB initially proposed in an exposure draft in July 2020. We are currently evaluating the change in the effective date on our implementation efforts. We have started our implementation efforts and we are evaluating the method of adoption and impact of the standard on our reported consolidated financial condition, results of operations, cash flows and required disclosures. The adoption of this standard is expected to have a significant impact on our consolidated financial condition, results of operations, cash flows and required disclosures, as well as systems, processes and controls.

Income Tax On December 18, 2019, the FASB issued an accounting standard that simplifies the accounting for income taxes by eliminating certain exceptions to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The amendments also simplified other areas including the accounting for franchise taxes and enacted tax laws or rates, and clarified the accounting for transactions that result in the step-up in the tax basis of goodwill. The standard is effective on January 1, 2021, with early adoption permitted. We do not expect the impact of the standard to be material to our consolidated financial condition, results of operations and cash flows.

Reference Rate Reform On March 12, 2020, the FASB issued an accounting standard that provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The standard allows us to account for certain contract modifications that result from the discontinuation of the London Inter-Bank Offered Rate (LIBOR) or another reference rate as a continuation of the existing contract without additional analysis.

This standard may be elected and applied prospectively over time from March 12, 2020 through December 31, 2022 as reference rate reform activities occur. We have started our implementation efforts and we are evaluating the method of adoption and impact of the standard on our reported consolidated financial condition, results of operations, cash flows and required disclosures.



Clarification of Accounting for Certain Equity Method Investments On January 16, 2020, the FASB issued an accounting standard to clarify how a previously issued standard regarding a company’s ability to measure the fair value of certain equity securities without a readily determinable fair value should interact with equity method investments standards. The previously issued standard provides that such equity securities could be measured at cost, minus impairment, if any, unless an observable transaction for an identical or similar security occurs (measurement alternative). The new standard clarifies that a company should consider observable transactions that require the company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with the equity method immediately before applying or upon discontinuing the equity method.

The standard further clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option.

The standard is effective for interim and annual reporting periods beginning after December 15, 2020. We are evaluating the impact adoption of this standard will have on our consolidated financial condition, results of operations, cash flows and required disclosures.

GOODWILL We performed our annual goodwill impairment tests of all reporting units in the third quarter of 2020 using a combination of both qualitative and quantitative assessments and concluded that our goodwill was not impaired. Our goodwill balance was $4.0 billion at September 30, 2020. For further information on goodwill see Note 13 to the Consolidated Financial Statements in the 2019 Annual Report.

3. Segment Information We report our results of operations consistent with the manner in which our chief operating decision makers review the business to assess performance and allocate resources, as follows:

GENERAL INSURANCE General Insurance business is presented as two operating segments:

North America — consists of insurance businesses in the United States, Canada and Bermuda. This also includes the results of Validus Reinsurance, Ltd. (Validus), Western World Insurance Group, Inc. and Glatfelter Insurance Group (Glatfelter).

International — consists of regional insurance businesses in Japan, the UK, Europe, Asia Pacific, Latin America and Caribbean, Middle East and Africa, and China. This also includes the results of Talbot Holdings, Ltd.

Results are presented before internal reinsurance transactions. North America and International operating segments consist of the following products:

– Commercial Lines — consists of Liability, Financial Lines, Property and Special Risks.

– Personal Insurance — consists of Personal Lines and Accident and Health.

LIFE AND RETIREMENT Life and Retirement business is presented as four operating segments:

• Individual Retirement — consists of fixed annuities, fixed index annuities, variable annuities and retail mutual funds. • Group Retirement — consists of group mutual funds, group annuities, individual annuity and investment products, and financial

planning and advisory services.

• Life Insurance — primary products in the U.S. include term life and universal life insurance. International operations include distribution of life and health products in the UK and Ireland.

• Institutional Markets — consists of stable value wrap products, structured settlement and pension risk transfer annuities, corporate- and bank-owned life insurance and guaranteed investment contracts (GICs).

On October 26, 2020, AIG announced its intention to separate its Life and Retirement business from AIG. For further discussion see Note 16 to the Condensed Consolidated Financial Statements.

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information


OTHER OPERATIONS Other Operations consists primarily of:

• Income from assets held by AIG Parent and other corporate subsidiaries.

• General operating expenses not attributable to AIG reporting segments.

• Certain compensation expenses attributable to Other Operations and reporting segments.

• Amortization of value of distribution network acquired related to the Validus and Glatfelter acquisitions.

• Interest expense attributable to AIG long-term debt as well as debt associated with consolidated investment entities.

• Results also include Blackboard and its subsidiaries which are focused on delivering commercial insurance solutions using digital technology, data analytics and automation. At the end of March 2020, Blackboard was placed into run-off.

LEGACY PORTFOLIO Legacy Portfolio represents exited or discontinued product lines, policy forms or distribution channels. Effective February 2018, the Bermuda domiciled composite reinsurer, Fortitude Re, is included in our Legacy Portfolio. The sale of Fortitude Re was completed on June 2, 2020, and Fortitude Re is only included in the Legacy Portfolio through such date. As of closing of the Majority Interest Fortitude Sale, these reinsurance transactions between AIG and Fortitude Re are no longer considered affiliated transactions and Fortitude Re is the reinsurer of the majority of AIG’s Legacy Portfolio.

Legacy Life and Retirement Run-Off Lines — Currently, the remaining legacy business not reinsured to Fortitude Holdings includes reserves that consist of certain structured settlements, pension risk transfer annuities, whole life and other small blocks of life and accident & health product lines.

Legacy General Insurance Run-Off Lines — Currently, the remaining legacy business not reinsured to Fortitude Holdings includes reserves that consist of excess workers’ compensation, environmental exposures and exposures to other products within General Insurance that are no longer actively marketed. Also includes the remaining reserves in Eaglestone Reinsurance Company.

Legacy Investments — Includes investment classes that we have placed into run-off including holdings in direct investments as well as investments in global capital markets and global real estate.

We evaluate segment performance based on adjusted revenues and adjusted pre-tax income (loss). Adjusted revenues and adjusted pre-tax income (loss) are derived by excluding certain items from total revenues and net income (loss) attributable to AIG, respectively. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. For the items excluded from adjusted revenues and adjusted pre-tax income (loss) see the table below.



The following table presents AIG’s continuing operations by operating segment:

Three Months Ended September 30, 2020 2019 Adjusted Adjusted Total Pre-tax Total Pre-tax (in millions) Revenues Income (Loss) Revenues Income (Loss) General Insurance

North America $ 3,417 $ 399 $ 3,878 $ 435 International 3,275 17 3,537 72

Total General Insurance 6,692 416 7,415 507 Life and Retirement

Individual Retirement 1,480 533 1,416 387 Group Retirement 758 338 726 203 Life Insurance 1,076 5 1,037 (7) Institutional Markets 556 99 654 63

Total Life and Retirement 3,870 975 3,833 646 Other Operations 128 (426) 139 (454) Legacy Portfolio 214 89 751 93 AIG Consolidation and elimination (148) (136) (81) (46) Total AIG Consolidated adjusted revenues and adjusted pre-tax income 10,756 918 12,057 746 Reconciling items from adjusted pre-tax income to pre-tax income:

Changes in fair value of securities used to hedge guaranteed living benefits 14 15 25 12

Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains (losses) - 78 - (65)

Changes in the fair value of equity securities 119 119 (51) (51) Other income (expense) - net 23 - 16 - Gain on extinguishment of debt - 2 - - Net investment income on Fortitude Re funds withheld assets(a) 458 458 - - Net realized capital gains (losses) on Fortitude Re funds withheld assets(a) 32 32 - - Net realized capital gains (losses) on Fortitude Re funds withheld embedded

derivative(a) (656) (656) - - Net realized capital gains (losses)(b) (525) (514) 867 881 Loss from divested businesses - (24) - (9) Non-operating litigation reserves and settlements - (1) - (5) Favorable prior year development and related amortization

changes ceded under retroactive reinsurance agreements - 30 - 59 Net loss reserve discount benefit (charge) - 31 - (235) Integration and transaction costs associated with acquired businesses - (1) - (3) Restructuring and other costs - (100) - (67) Non-recurring costs related to regulatory or accounting changes - (19) - (3)

Revenues and Pre-tax income $ 10,221 $ 368 $ 12,914 $ 1,260



Nine Months Ended September 30, 2020 2019 Adjusted Adjusted Total Pre-Tax Total Pre-Tax (in millions) Revenues Income (Loss) Revenues Income (Loss) General Insurance

North America $ 9,908 $ 813 $ 12,001 $ 2,087 International 9,706 279 10,743 668

Total General Insurance 19,614 1,092 22,744 2,755 Life and Retirement

Individual Retirement 4,183 1,389 4,233 1,483 Group Retirement 2,164 695 2,225 728 Life Insurance 3,280 51 3,264 195 Institutional Markets 2,964 295 2,143 213

Total Life and Retirement 12,591 2,430 11,865 2,619 Other Operations 305 (1,436) 422 (1,256) Legacy Portfolio 1,197 (22) 2,197 324 AIG Consolidation and elimination (262) (171) (257) (172) Total AIG Consolidated adjusted revenues and adjusted pre-tax income 33,445 1,893 36,971 4,270 Reconciling items from adjusted pre-tax income to pre-tax income (loss):

Changes in fair value of securities used to hedge guaranteed living benefits 42 24 214 183

Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains (losses) - (205) - (39)

Changes in the fair value of equity securities (16) (16) 6 6 Other income (expense) - net 46 - 27 - Loss on extinguishment of debt - (15) - (13) Net investment income on Fortitude Re funds withheld assets(a) 574 574 - - Net realized capital gains (losses) on Fortitude Re funds withheld assets(a) 128 128 - - Net realized capital gains (losses) on Fortitude Re funds withheld embedded

derivative(a) (1,493) (1,493) - - Net realized capital gains(b) 1,328 1,369 713 758 loss from divested businesses - (8,652) - (4) Non-operating litigation reserves and settlements 6 5 - (6) Favorable prior year development and related amortization

changes ceded under retroactive reinsurance agreements - 71 - 211 Net loss reserve discount charge - (41) - (920) Integration and transaction costs associated with acquired businesses - (7) - (16) Restructuring and other costs - (324) - (174) Non-recurring costs related to regulatory or accounting changes - (46) - (5)

Revenues and Pre-tax income (loss) $ 34,060 $ (6,735) $ 37,931 $ 4,251

(a) Represents activity subsequent to the deconsolidation of Fortitude Re on June 2, 2020.

(b) Includes all net realized capital gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets).

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


4. Fair Value Measurements

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

• Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.

• Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.



ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

September 30, 2020 Counterparty Cash (in millions) Level 1 Level 2 Level 3 Netting(a) Collateral Total Assets:

Bonds available for sale: U.S. government and government sponsored entities $ 33 $ 5,102 $ - $ - $ - $ 5,135 Obligations of states, municipalities and political subdivisions - 13,990 2,183 - - 16,173 Non-U.S. governments 41 15,126 7 - - 15,174 Corporate debt - 159,991 2,115 - - 162,106 RMBS - 20,759 12,655 - - 33,414 CMBS - 14,796 981 - - 15,777 CDO/ABS - 8,833 9,353 - - 18,186

Total bonds available for sale 74 238,597 27,294 - - 265,965 Other bond securities:

U.S. government and government sponsored entities - 1,870 - - - 1,870 Non-U.S. governments - - - - - - Corporate debt - 12 - - - 12 RMBS - 320 168 - - 488 CMBS - 274 48 - - 322 CDO/ABS - 168 2,555 - - 2,723

Total other bond securities - 2,644 2,771 - - 5,415 Equity securities 827 18 26 - - 871 Other invested assets(b) - 94 1,583 - - 1,677 Derivative assets:

Interest rate contracts 3 5,051 - - - 5,054 Foreign exchange contracts - 1,585 3 - - 1,588 Equity contracts 6 841 110 - - 957 Credit contracts - - 1 - - 1 Other contracts - - 13 - - 13 Counterparty netting and cash collateral - - - (3,695) (3,129) (6,824)

Total derivative assets 9 7,477 127 (3,695) (3,129) 789 Short-term investments 3,195 4,019 - - - 7,214 Other assets - - 112 - - 112 Separate account assets 88,023 4,013 - - - 92,036

Total $ 92,128 $ 256,862 $ 31,913 $ (3,695) $ (3,129) $ 374,079 Liabilities:

Policyholder contract deposits $ - $ - $ 9,322 $ - $ - $ 9,322 Derivative liabilities:

Interest rate contracts - 4,559 - - - 4,559 Foreign exchange contracts - 619 - - - 619 Equity contracts 12 84 5 - - 101 Credit contracts - 24 45 - - 69 Other contracts - - 7 - - 7 Counterparty netting and cash collateral - - - (3,695) (1,060) (4,755)

Total derivative liabilities 12 5,286 57 (3,695) (1,060) 600 Fortitude Re funds withheld payable - - 5,136 - - 5,136 Other liabilities - - - - - - Long-term debt - 2,169 - - - 2,169

Total $ 12 $ 7,455 $ 14,515 $ (3,695) $ (1,060) $ 17,227



December 31, 2019 Counterparty Cash (in millions) Level 1 Level 2 Level 3 Netting(a) Collateral Total Assets:

Bonds available for sale: U.S. government and government sponsored entities $ 135 $ 5,245 $ - $ - $ - $ 5,380 Obligations of states, municipalities and political subdivisions - 13,197 2,121 - - 15,318 Non-U.S. governments 60 14,809 - - - 14,869 Corporate debt - 147,973 1,663 - - 149,636 RMBS - 19,397 13,408 - - 32,805 CMBS - 13,377 1,053 - - 14,430 CDO/ABS - 10,962 7,686 - - 18,648

Total bonds available for sale 195 224,960 25,931 - - 251,086 Other bond securities:

U.S. government and government sponsored entities - 2,121 - - - 2,121 Non-U.S. governments - - - - - - Corporate debt - 18 - - - 18 RMBS - 346 143 - - 489 CMBS - 272 50 - - 322 CDO/ABS - 187 3,545 - - 3,732

Total other bond securities - 2,944 3,738 - - 6,682 Equity securities 756 77 8 - - 841 Other invested assets(b) - 86 1,192 - - 1,278 Derivative assets:

Interest rate contracts 1 3,199 - - - 3,200 Foreign exchange contracts - 1,034 6 - - 1,040 Equity contracts 5 593 171 - - 769 Credit contracts - - 3 - - 3 Other contracts - - 14 - - 14 Counterparty netting and cash collateral - - - (2,427) (1,806) (4,233)

Total derivative assets 6 4,826 194 (2,427) (1,806) 793 Short-term investments 2,299 3,044 - - - 5,343 Other assets 57 2,212 89 - - 2,358 Separate account assets 89,069 4,203 - - - 93,272

Total $ 92,382 $ 242,352 $ 31,152 $ (2,427) $ (1,806) $ 361,653 Liabilities:

Policyholder contract deposits $ - $ - $ 6,910 $ - $ - $ 6,910 Derivative liabilities:

Interest rate contracts 4 2,745 - - - 2,749 Foreign exchange contracts - 1,025 - - - 1,025 Equity contracts 8 111 20 - - 139 Credit contracts - 24 65 - - 89 Other contracts - - 7 - - 7 Counterparty netting and cash collateral - - - (2,427) (527) (2,954)

Total derivative liabilities 12 3,905 92 (2,427) (527) 1,055 Other liabilities - 45 - - - 45 Long-term debt - 2,062 - - - 2,062

Total $ 12 $ 6,012 $ 7,002 $ (2,427) $ (527) $ 10,072

(a) Represents netting of derivative exposures covered by qualifying master netting agreements.

(b) Excludes investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent), which totaled $5.4 billion and $5.5 billion as of September 30, 2020 and December 31, 2019, respectively.



CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS

The following tables present changes during the three- and nine-month periods ended September 30, 2020 and 2019 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets at September 30, 2020 and 2019: Net Changes in Realized Unrealized Gains and Purchases, Changes in (Losses) Included in Unrealized Sales, Unrealized Gains Other Comprehensive Gains Issuances (Losses) Included Income (Loss) for Fair Value (Losses) Other and Gross Gross Fair Value in Income on Recurring Level 3 Beginning Included Comprehensive Settlements, Transfers Transfers Divested End Instruments Held Instruments Held (in millions) of Period in Income Income (Loss) Net In Out Businesses of Period at End of Period at End of Period Three Months Ended September 30, 2020 Assets:

Bonds available for sale: Obligations of states,

municipalities and political subdivisions $ 2,279 $ 3 $ (4) $ (30) $ - $ (65) $ - $ 2,183 $ - $ -

Non-U.S. governments 5 - 1 - 1 - - 7 - - Corporate debt 1,900 (33) 52 (25) 452 (231) - 2,115 - 38 RMBS 12,678 192 301 (412) 3 (107) - 12,655 - 335 CMBS 1,149 3 36 (11) - (196) - 981 - 27 CDO/ABS 9,461 5 180 (174) 125 (244) - 9,353 - 172

Total bonds available for sale(a) 27,472 170 566 (652) 581 (843) - 27,294 - 572 Other bond securities:

RMBS 168 16 - (16) - - - 168 4 - CMBS 47 1 - - - - - 48 1 - CDO/ABS 2,531 124 - (100) - - - 2,555 34 -

Total other bond securities 2,746 141 - (116) - - - 2,771 39 - Equity securities 43 - 2 1 7 (27) - 26 1 - Other invested assets 1,486 74 (2) 25 - - - 1,583 - - Other assets 111 - - 2 - - (1) 112 - -

Total $ 31,858 $ 385 $ 566 $ (740) $ 588 $ (870) $ (1) $ 31,786 $ 40 $ 572 Net Changes in Realized Unrealized Gains and Purchases, Changes in (Losses) Included in Unrealized Sales, Unrealized Gains Other Comprehensive (Gains) Issuances (Losses) Included Income (Loss) for Fair Value Losses Other and Gross Gross Fair Value in Income on Recurring Level 3 Beginning Included Comprehensive Settlements, Transfers Transfers Divested End Instruments Held Instruments Held (in millions) of Period in Income Income (Loss) Net In Out Businesses of Period at End of Period at End of Period Liabilities:

Policyholder contract deposits $ 9,233 $ 19 $ - $ 70 $ - $ - $ - $ 9,322 $ 273 $ - Derivative liabilities, net:

Interest rate contracts - - - - - - - - - - Foreign exchange contracts (1) (2) - - - - - (3) 2 - Equity contracts (53) 9 - (65) (1) 5 - (105) - - Credit contracts 45 1 - (2) - - - 44 (7) - Other contracts (3) (19) - 16 - - - (6) 18 -

Total derivative liabilities, net(b) (12) (11) - (51) (1) 5 - (70) 13 - Fortitude Re funds withheld

payable 4,510 656 - (30) - - - 5,136 (256) - Total $ 13,731 $ 664 $ - $ (11) $ (1) $ 5 $ - $ 14,388 $ 30 $ -



Net Changes in Realized Unrealized Gains and Purchases, Changes in (Losses) Included in Unrealized Sales, Unrealized Gains Other Comprehensive Gains Issuances (Losses) Included Income (Loss) for Fair Value (Losses) Other and Gross Gross Fair Value in Income on Recurring Level 3 Beginning Included Comprehensive Settlements, Transfers Transfers Divested End Instruments Held Instruments Held (in millions) of Period in Income Income (Loss) Net In Out Businesses of Period at End of Period at End of Period Nine Months Ended September 30, 2020 Assets:

Bonds available for sale: Obligations of states,

municipalities and political subdivisions $ 2,121 $ 8 $ 195 $ 127 $ 27 $ (295) $ - $ 2,183 $ - $ 193

Non-U.S. governments - - 1 5 7 (6) - 7 - - Corporate debt 1,663 (101) 43 95 1,074 (659) - 2,115 - 59 RMBS 13,408 532 (375) (806) 29 (133) - 12,655 - (213) CMBS 1,053 14 70 17 23 (196) - 981 - 66 CDO/ABS 7,686 25 55 (19) 2,062 (456) - 9,353 - 38

Total bonds available for sale(a) 25,931 478 (11) (581) 3,222 (1,745) - 27,294 - 143 Other bond securities:

RMBS 143 16 - 9 - - - 168 3 - CMBS 50 - - (2) - - - 48 (1) - CDO/ABS 3,545 225 - (1,215) - - - 2,555 25 -

Total other bond securities 3,738 241 - (1,208) - - - 2,771 27 - Equity securities 8 (1) 3 11 33 (28) - 26 1 - Other invested assets 1,192 11 (2) 232 150 - - 1,583 (13) - Other assets 89 - - 61 - - (38) 112 - -

Total $ 30,958 $ 729 $ (10) $ (1,485) $ 3,405 $ (1,773) $ (38) $ 31,786 $ 15 $ 143 Net Changes in Realized Unrealized Gains and Purchases, Changes in (Losses) Included in Unrealized Sales, Unrealized Gains Other Comprehensive (Gains) Issuances (Losses) Included Income (Loss) for Fair Value Losses Other and Gross Gross Fair Value in Income on Recurring Level 3 Beginning Included Comprehensive Settlements, Transfers Transfers Divested End Instruments Held Instruments Held (in millions) of Period in Income Income (Loss) Net In Out Businesses of Period at End of Period at End of Period Liabilities:

Policyholder contract deposits $ 6,910 $ 2,250 $ - $ 162 $ - $ - $ - $ 9,322 $ (1,436) $ - Derivative liabilities, net:

Interest rate contracts - (1) - 1 - - - - 1 - Foreign exchange contracts (6) 2 - 1 - - - (3) 2 - Equity contracts (151) 19 - 23 (1) 5 - (105) (62) - Credit contracts 62 (59) - 41 - - - 44 8 - Other contracts (7) (46) - 47 - - - (6) 45 -

Total derivative liabilities, net(b) (102) (85) - 113 (1) 5 - (70) (6) - Fortitude Re funds withheld

payable - 1,493 - (30) - - 3,673 5,136 (919) - Total $ 6,808 $ 3,658 $ - $ 245 $ (1) $ 5 $ 3,673 $ 14,388 $ (2,361) $ -



Net Changes in Realized and Unrealized Gains Unrealized Purchases, (Losses) Included Fair Value Gains (Losses) Other Sales, Gross Gross Fair Value in Income on Beginning Included Comprehensive Issuances and Transfers Transfers Divested End Instruments Held (in millions) of Period in Income Income (Loss) Settlements, Net In Out Businesses of Period at End of Period Three Months Ended September 30, 2019 Assets:

Bonds available for sale: Obligations of states, municipalities

and political subdivisions $ 2,162 $ (1) $ 119 $ 92 $ - $ (265) $ - $ 2,107 $ - Non-U.S. governments 2 6 - - 5 - - 13 - Corporate debt 1,821 (36) (2) (535) 112 (85) - 1,275 - RMBS 13,863 166 15 (418) 16 (82) - 13,560 - CMBS 1,103 2 32 85 - (172) - 1,050 - CDO/ABS 9,062 3 37 (170) 7 - - 8,939 -

Total bonds available for sale 28,013 140 201 (946) 140 (604) - 26,944 - Other bond securities:

RMBS 830 9 - (24) - - - 815 1 CMBS 88 1 - (17) - (4) - 68 (2) CDO/ABS 4,150 115 - (334) - - - 3,931 28

Total other bond securities 5,068 125 - (375) - (4) - 4,814 27 Equity securities 35 - - (29) 2 - - 8 (2) Other invested assets 605 6 - (22) - - - 589 7 Other assets 61 - - (1) - - - 60 -

Total $ 33,782 $ 271 $ 201 $ (1,373) $ 142 $ (608) $ - $ 32,415 $ 32 Net Changes in Realized and Unrealized Gains Unrealized Purchases, (Losses) Included Fair Value (Gains) Losses Other Sales, Gross Gross Fair Value in Income on Beginning Included Comprehensive Issuances and Transfers Transfers Divested End Instruments Held (in millions) of Period in Income Income (Loss) Settlements, Net In Out Businesses of Period at End of Period Liabilities:

Policyholder contract deposits $ 6,065 $ 861 $ - $ 240 $ - $ - $ - $ 7,166 $ (691) Derivative liabilities, net:

Interest rate contracts 16 (3) - (13) - - - - - Foreign exchange contracts (4) 6 - (3) - - - (1) - Equity contracts (113) 12 - - - - - (101) (13) Credit contracts 173 (24) - (47) - - - 102 14 Other contracts (7) (17) - 17 - - - (7) 15

Total derivative liabilities, net(b) 65 (26) - (46) - - - (7) 16 Total $ 6,130 $ 835 $ - $ 194 $ - $ - $ - $ 7,159 $ (675)



Net Changes in Realized and Unrealized Gains Unrealized Purchases, (Losses) Included Fair Value Gains (Losses) Other Sales, Gross Gross Fair Value in Income on Beginning Included Comprehensive Issuances and Transfers Transfers Divested End Instruments Held (in millions) of Period in Income Income (Loss) Settlements, Net In Out Businesses of Period at End of Period Nine Months Ended September 30, 2019 Assets:

Bonds available for sale: Obligations of states, municipalities

and political subdivisions $ 2,000 $ (2) $ 321 $ 178 $ 35 $ (425) $ - $ 2,107 $ - Non-U.S. governments 11 5 - (4) 5 (4) - 13 - Corporate debt 864 (10) 79 (600) 1,155 (213) - 1,275 - RMBS 14,199 575 176 (1,234) 83 (239) - 13,560 - CMBS 917 8 62 381 58 (376) - 1,050 - CDO/ABS 9,102 15 204 (111) 103 (374) - 8,939 -

Total bonds available for sale 27,093 591 842 (1,390) 1,439 (1,631) - 26,944 - Other bond securities:

RMBS 1,290 69 - (544) - - - 815 (18) CMBS 77 5 - - - (14) - 68 3 CDO/ABS 4,478 299 - (749) - (97) - 3,931 128

Total other bond securities 5,845 373 - (1,293) - (111) - 4,814 113 Equity securities 27 - - (20) 2 (1) - 8 2 Other invested assets 587 24 1 (23) - - - 589 27 Other assets 58 - - 2 - - - 60 -

Total $ 33,610 $ 988 $ 843 $ (2,724) $ 1,441 $ (1,743) $ - $ 32,415 $ 142 Net Changes in Realized and Unrealized Gains Unrealized Purchases, (Losses) Included Fair Value (Gains) Losses Other Sales, Gross Gross Fair Value in Income on Beginning Included Comprehensive Issuances and Transfers Transfers Divested End Instruments Held (in millions) of Period in Income Income (Loss) Settlements, Net In Out Businesses of Period at End of Period Liabilities:

Policyholder contract deposits $ 4,116 $ 2,400 $ - $ 650 $ - $ - $ - $ 7,166 $ (2,044) Derivative liabilities, net:

Interest rate contracts 15 - - (15) - - - - 1 Foreign exchange contracts (5) (4) - 8 - - - (1) - Equity contracts (75) (8) - (18) - - - (101) 19 Credit contracts 227 (51) - (74) - - - 102 13 Other contracts (9) (50) - 52 - - - (7) 50

Total derivative liabilities, net(b) 153 (113) - (47) - - - (7) 83 Total $ 4,269 $ 2,287 $ - $ 603 $ - $ - $ - $ 7,159 $ (1,961)

(a) As a result of the adoption of the Financial Instruments Credit Losses Standard on January 1, 2020, credit losses are included in net realized and unrealized (gains) losses included in income.

(b) Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.



Net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above are reported in the Condensed Consolidated Statements of Income as follows:

Net Net Realized Investment Capital Other (in millions) Income Gains (Losses) Income Total Three Months Ended September 30, 2020 Assets:

Bonds available for sale* $ 177 $ (7) $ - $ 170 Other bond securities 143 (2) - 141 Equity securities - - - - Other invested assets 74 - - 74

Nine Months Ended September 30, 2020 Assets:

Bonds available for sale* $ 557 $ (79) $ - $ 478 Other bond securities (25) 266 - 241 Equity securities - (1) - (1) Other invested assets 11 - - 11

Three Months Ended September 30, 2019 Assets:

Bonds available for sale $ 164 $ (24) $ - $ 140 Other bond securities 110 15 - 125 Other invested assets 7 (1) - 6

Nine Months Ended September 30, 2019 Assets:

Bonds available for sale $ 651 $ (60) $ - $ 591 Other bond securities 306 67 - 373 Other invested assets 25 (1) - 24

Net Net Realized Investment Capital Other (in millions) Income (Gains) Losses Income Total Three Months Ended September 30, 2020 Liabilities:

Policyholder contract deposits $ - $ 19 $ - $ 19 Derivative liabilities, net - 5 (16) (11) Fortitude Re funds withheld payable - 656 - 656

Nine Months Ended September 30, 2020 Liabilities:

Policyholder contract deposits $ - $ 2,250 $ - $ 2,250 Derivative liabilities, net - (41) (44) (85) Fortitude Re funds withheld payable - 1,493 - 1,493

Three Months Ended September 30, 2019 Liabilities:

Policyholder contract deposits $ - $ 861 $ - $ 861 Derivative liabilities, net - (11) (15) (26)

Nine Months Ended September 30, 2019 Liabilities:

Policyholder contract deposits $ - $ 2,400 $ - $ 2,400 Derivative liabilities, net - (64) (49) (113)

* As a result of the adoption of the Financial Instruments Credit Losses Standard on January 1, 2020, credit losses are included in net realized capital gains (losses).



The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three- and nine-month periods ended September 30, 2020 and 2019 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:

Issuances Purchases, Sales, and Issuances and (in millions) Purchases Sales Settlements(a) Settlements, Net(a) Three Months Ended September 30, 2020 Assets:

Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 34 $ (18) $ (46) $ (30) Non-U.S. governments - - - - Corporate debt 23 (2) (46) (25) RMBS 182 - (594) (412) CMBS 2 (10) (3) (11) CDO/ABS 234 (78) (330) (174)

Total bonds available for sale 475 (108) (1,019) (652) Other bond securities:

RMBS - - (16) (16) CMBS - - - - CDO/ABS - - (100) (100)

Total other bond securities - - (116) (116) Equity securities 1 - - 1 Other invested assets 25 - - 25 Other assets - - 2 2

Total assets $ 501 $ (108) $ (1,133) $ (740) Liabilities:

Policyholder contract deposits $ - $ 170 $ (100) $ 70 Derivative liabilities, net (19) - (32) (51) Fortitude Re funds withheld payable - - (30) (30) Other liabilities - - - -

Total liabilities $ (19) $ 170 $ (162) $ (11) Three Months Ended September 30, 2019 Assets:

Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 109 $ - $ (17) $ 92 Non-U.S. governments - - - - Corporate debt 1 (128) (408) (535) RMBS 253 - (671) (418) CMBS 92 - (7) 85 CDO/ABS 458 (198) (430) (170)

Total bonds available for sale 913 (326) (1,533) (946) Other bond securities:

RMBS - - (24) (24) CMBS - (16) (1) (17) CDO/ABS - (153) (181) (334)

Total other bond securities - (169) (206) (375) Equity securities - - (29) (29) Other invested assets 21 - (43) (22) Other assets - - (1) (1)

Total assets $ 934 $ (495) $ (1,812) $ (1,373) Liabilities:

Policyholder contract deposits $ - $ 240 $ - $ 240 Derivative liabilities, net (7) - (39) (46)

Total liabilities $ (7) $ 240 $ (39) $ 194



Issuances Purchases, Sales, and Issuances and (in millions) Purchases Sales Settlements(a) Settlements, Net(a) Nine Months Ended September 30, 2020 Assets:

Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 201 $ (20) $ (54) $ 127 Non-U.S. governments 5 - - 5 Corporate debt 256 (7) (154) 95 RMBS 883 - (1,689) (806) CMBS 56 (17) (22) 17 CDO/ABS 715 (103) (631) (19)

Total bonds available for sale 2,116 (147) (2,550) (581) Other bond securities:

RMBS 37 - (28) 9 CMBS - - (2) (2) CDO/ABS 35 (579) (671) (1,215)

Total other bond securities 72 (579) (701) (1,208) Equity securities 11 - - 11 Other invested assets 277 - (45) 232 Other assets 55 - 6 61

Total assets $ 2,531 $ (726) $ (3,290) $ (1,485) Liabilities:

Policyholder contract deposits $ - $ 514 $ (352) $ 162 Derivative liabilities, net (43) 8 148 113 Fortitude Re funds withheld payable - - (30) (30) Other liabilities - - - -

Total liabilities $ (43) $ 522 $ (234) $ 245 Nine Months Ended September 30, 2019 Assets:

Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 243 $ (16) $ (49) $ 178 Non-U.S. governments - - (4) (4) Corporate debt 58 (129) (529) (600) RMBS 860 (26) (2,068) (1,234) CMBS 455 - (74) 381 CDO/ABS 1,628 (508) (1,231) (111)

Total bonds available for sale 3,244 (679) (3,955) (1,390) Other bond securities:

RMBS - (437) (107) (544) CMBS 18 (16) (2) - CDO/ABS - (153) (596) (749)

Total other bond securities 18 (606) (705) (1,293) Equity securities 9 - (29) (20) Other invested assets 64 - (87) (23) Other assets - - 2 2

Total assets $ 3,335 $ (1,285) $ (4,774) $ (2,724) Liabilities:

Policyholder contract deposits $ - $ 616 $ 34 $ 650 Derivative liabilities, net (29) - (18) (47)

Total liabilities $ (29) $ 616 $ 16 $ 603

(a) There were no issuances during the three- and nine-month periods ended September 30, 2020 and 2019.



Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at September 30, 2020 and 2019 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

Transfers of Level 3 Assets and Liabilities

The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $(79) million and $(207) million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and nine-month

American International Group, Inc....Policyholder contract deposits (portion measured at fair value:...

Documents

Transcript of American International Group, Inc....Policyholder contract deposits (portion measured at fair value:...